Insolvencies fall but companies warned to watch cashflow

The rate of business insolvencies over the last year has fallen, according to new figures revealed by Experian. There have been two consecutive months of falling insolvency rates, whilst month-to-month rates have also decreased. June's insolvency rate was at 0.07%, down from 0.08% in May 2012. SMEs in particular were showing an improvement, with the rate for companies employing between 6-10 employees falling to 0.13% in June 2013, down from 0.17% in the same month last year. Companies with a workforce of between 10-25 employees saw a rate of 0.15%, down from 0.19% over the same timeframe. Managing Director for Experian Business Information Services, Max Firth, felt the news pointed at an improving economic picture: “We've already seen several months of low, but level insolvency rates and the fact they have come down further indicates that firms are operating with more confidence than in recent years." But there was also a warning that insolvency rates could easily increase again as the economy improves: “This makes it all the more important for SMEs to understand who they are supplying, how quickly they pay, and think about what credit options are open to them in advance”, Mr Firth added. John Colburn, Corporate Manager for SBF, said: “During any economic growth period, it is crucial that SMEs really do keep cashflow high and limit the risk of bad debt and slow-paying debtors as much as possible”.